Bankrupt crypto exchange FTX: New boss John Ray criticizes unprecedented chaos

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Logo of crypto exchange FTX: »Inexperienced, naive and possibly compromised people«

Photo: DADO RUVIC / REUTERS

John Ray has 40 years of experience in restructuring companies. Among other things, he was entrusted with winding up the US company Enron after its historic bankruptcy.

Now he has taken over the business at the insolvent crypto exchange FTX - and is shocked by the condition and the previous management of the group.

"Never in my career have I experienced such a complete failure of corporate control and such a lack of trustworthy financial information," said Ray, who took over the management of FTX after filing for bankruptcy.

What the ex-management team around FTX founder Sam Bankman-Fried did was simply “unacceptable”.

"Erratic and misleading" statements

At FTX, "control rested in the hands of a very small group of inexperienced, naïve, and possibly compromised individuals," Ray explained in his first full-length report to the bankruptcy court.

According to the restructuring expert, the situation is unprecedented.

FTX – one of the largest trading platforms for digital currencies such as Bitcoin – collapsed within a few days after an enormous outflow of funds due to liquidity concerns.

Billions in customer funds could not be paid out.

On Friday, the 30-year-old FTX founder Bankman-Fried announced his resignation and filed for bankruptcy for the group in the US state of Delaware.

Meanwhile, the Bahamas police have launched an investigation after securities regulators said the company was suspected of, among other things, embezzling customer funds.

FTX was also headquartered in the Bahamas.

How and where exactly the bankruptcy proceedings will take place is still unclear.

Because Bankman-Fried has applied for bankruptcy protection under Chapter Eleven of US bankruptcy law for more than 130 companies in his crypto empire.

But the authorities in the Bahamas have already frozen company assets and appointed an insolvency administrator.

Binance Announces Financial Condition Report

Bankman-Fried, meanwhile, told a reporter for news website Vox that the US filing for bankruptcy was his biggest mistake.

The people in charge now would try to burn down the company.

Meanwhile, new FTX boss Ray lamented that Bankman-Fried continued to make "erratic and misleading" public statements.

Meanwhile, the head of rival company Binance, Changpeng Zhao, has announced a report on its platform's financial health.

Binance will make public "in two weeks" how its finances are doing, Zhao said on Thursday at a media congress in Saudi Arabia.

The bankruptcy of FTX must be investigated, he demanded.

The crisis at FTX had caused the price of several cryptocurrencies such as Bitcoin to collapse.

Binance, the world's largest cryptocurrency platform, "definitely" has the means to survive a massive withdrawal of customer funds, Canadian-Chinese billionaire Zhang said.

Zhang called the price crash of FTX, which is said to have temporarily managed 32 billion dollars, a normal market reaction.

The billionaire had contributed to the FTX crisis by canceling the initially announced purchase.

At the Saudi Arabian congress, Zhang downplayed his influence: "If I sell Bitcoin, nobody cares," he said.

The reason for the problems of FTX were the investors who had become suspicious.

FTX founder Bankman-Fried had long been hailed as a crypto prodigy.

Recently, however, it became public that the Alameda Research investment fund, also founded by Bankman-Fried, had invested in cryptocurrencies issued by FTX.com in the course of dubious financial transactions.

Apr/dpa/AFP